Document Content

DECISION

Promulgating the Regulation on auction of State Companies

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the November 26, 2003 Law on State Enterprises;

Pursuant to the Government's Decree No. 80/2005/ND-CP of June 22, 2005 on assignment, sale, business contracting and lease of state companies;

At the proposal of the Finance Minister,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on auction of state companies.

Article 2.- This Decision takes effect 15 days after its publication in "CONG BAO." All previous stipulations which are contrary to this Decision are hereby annulled.

Article 3.- Ministers, heads of ministerial-level agencies, heads of government-attached agencies, presidents of People's Committees of provinces or centrally-run cities, and managing boards of state corporations established under the Prime Minister's decisions shall have to implement this Decision.

Prime Minister

PHAN VAN KHAI

REGULATION ON AUCTION OF STATE COMPANIES

(Promulgated together with the Prime Minister's Decision No. 330/2005/QD-TTg of December 13, 2005)

Chapter I

GENERAL PROVISIONS

Article 1.- Subjects of application

1. This Regulation provides for the auction of entire independent state companies, independent-accounting member companies of state corporations or sections of state companies (hereinafter referred to collectively as enterprises) under decisions of competent agencies.

2. This Regulation shall not apply to enterprises being state-run agricultural or forestry farms, and the separate sale of enterprises' assets.

Article 2.- Terms and expressions referred to in this Regulation shall be construed as follows

1. The auctioning of enterprises means the charged ownership transfer of the whole enterprises to the ownership of other collectives, individuals or legal persons by mode of competitive and open bidding.

2. The agency deciding on the auction of an enterprise (seller) means a representative or a mandatary of the owner, that exercises the rights and performs the obligations of the owner in the enterprise auction as provided for in Article 54 of the Government's Decree No. 80/2005/ND-CP of June 22, 2005 on assignment, sale, business contracting and lease of state companies.

3. The auction steering board means a body set up by the agency deciding on auction of an enterprise to conduct the auction according to the provisions of this Regulation.

4. The witness means a notary public present to eyewitness an auction session.

5. Investors mean organizations or individuals participating in an auction as defined in Article 3 of this Regulation.

6. Bidders mean buyers or their lawful representatives, who offer bids at an auction session and sign auction minutes (in cases where they win such auction session).

7. The auction reserve price means the minimum price level announced by the agency deciding on the enterprise auction to serve as a basis for the auctioning.

8. The selling price of enterprise means the highest bid made by a buyer at an auction session.

9. The enterprise purchase amount means a sum of money to be paid by the buyer on the basis of the enterprise selling price after the price discount regime (if any) has been applied.

10. Auction minutes means a written record of proceedings at an auction session (the results of the auction session, the buyer, the seller, the selling price or reason(s) for unsuccessful auction session).

Article 3.- Investors participating in auctions

Investors participating in auctions are domestic as well as foreign organizations and individuals, including:

1. Vietnamese organizations and enterprises of all economic sectors, which are lawfully operating according to the provisions of law.

2. Foreign organizations and individuals licensed to invest according to the provisions of Vietnamese law.

3. Vietnamese citizens who have the civil act capacity, except for persons not allowed to establish and manage enterprises, as defined in Clauses 2, 3, 4, 5, 6, 7 and 9, Article 9 of the Law on Enterprises.

4. Vietnamese people having foreign nationalities and licensed to invest in Vietnam.

Article 4.- Auctioning organizations and auction venues

1. Auctioning organizations are financial consultancy companies or securities companies selected by agencies deciding on sale of enterprises by mode of designation for hire contracts.

2. Auction venues

a/ Public auctions shall be held at such organizations with the auctioning functions and capability as financial consultancy companies or securities companies, for enterprises with the total post-revaluation value of their assets being less than VND 30 billion each;

b/ Public auctions shall be held at securities trading centers, for enterprises with the total post-revaluation value of their assets being VND 30 billion or more each.

Agencies deciding on sale of enterprises shall select and decide on auction venues.

Article 5.- Conditions for auctioning enterprises

1. Enterprises to be auctioned are those which had their financial problems solved according to the state's current regulations; were given financial supports for employing all their laborers according to the provisions of law on labor and implementing the policies toward laborers redundant due to the reorganization of state enterprises as defined in Article 17 of the Government's Decree No. 80/2005/ND-CP of June 22, 2005.

2. After the financial settlement and revaluation of assets, the reserve prices (exclusive of land use right value) for auctioning enterprises must be positive figures, for case of sale with inheritance of debts. In case of non-inheritance of debts, the reserve prices must be sufficient to pay at least payable debts.

Article 6.- Rights and obligations of buyers

1. To fulfill their commitments in economic contracts already signed with sellers.

2. To continue organizing production and/or business activities of enterprises; inherit debts and exercise the creditors' rights to receivable debts and perform the debtors' obligations to payable debts (in case of sale with debt inheritance) of enterprises.

3. Rights and obligations of foreign investors and foreign-invested enterprises participating in the purchase of enterprises depend on the form of the transformed enterprises after they have been purchased under the provisions of Vietnamese law and the Prime Minister's decisions.

The State guarantees legitimate rights and benefits of enterprise buyers.

Chapter II

SPECIFIC PROVISIONS

I. AUCTIONING PROCEDURES

Article 7.- Preparation for an auction

1. Basing itself on the plan on ownership transformation of a state company approved by the Prime Minister, the agency deciding on the sale of such enterprise shall select and issue a decision on the form of selling the enterprise through an auction, and concurrently set up an auction steering board.

An auction steering board shall be composed of 5 persons at most. The agency deciding on the enterprise auction shall decide on the number and arrangement of members of the auction steering board.

2. Valuation of the enterprise

a/ Within 30 working days after the decision on enterprise auction is issued, basing himself/herself on the latest quarterly settlement report, the director of the enterprise shall have to complete the following jobs:

- Inventorying, classifying and revaluating the assets and debts.

- Drawing up of a list of laborers.

- Preparing all legal dossiers and papers, unliquidated contracts, and certificates of the enterprise's rights to own or use assets and land.

- Compiling enterprise auction dossiers, making a general description of the actual current condition of technologies, assets, financial status, debts, and qualifications and structure of laborers.

Then the enterprise's director shall send the above-said documents to the enterprise auction-steering board and the finance agency of the same level. He/she shall bear responsibility for the accuracy and truthfulness of the said information.

b/ Within 5 working days after receiving the enterprise's report, the enterprise auction steering board shall have to organize the valuation of the enterprise according to the following regulations:

- For enterprises which have a total asset value of over VND billion each recorded in the accounting books, the enterprise auction steering board shall select to designate and sign a contract to hire a valuation organization from the list annually announced by the Finance Ministry. The time limit for valuation of an enterprise shall be 30 days at most.

- For enterprises which have a total asset value of under VND 30 billion each recorded in the accounting books, the enterprise auction steering board shall select to designate an valuation organization or assign the concerned enterprise to value itself.

The enterprise's value and auction reserve price are exclusive of land use right value, even in cases where such enterprise has been assigned land by the State (the enterprise has paid land use levy).

c/ After buying enterprises, domestic investors may opt for the form of land assignment or land rent, whereas foreign investors shall be leased land according to the provisions of land law. The prices of land for lease or assignment shall be decided by provincial/municipal People's Committees.

3. The auction steering board shall base itself on the results of valuation of the enterprise to consider and propose the agency having decided on enterprise sale to announce the reserve price for the enterprise auction.

4. The agency having decided on enterprise sale shall designate the enterprise-selling organization according to the provisions of Clause 1, Article 4 of this Regulation.

Article 8.- Announcement of enterprise auction

1. Within 5 working days after the agency having decided on enterprise sale announces the reserve price, the enterprise-selling organization shall have to announce necessary information on the enterprise and the auction on the mass media at the auctioning organization and the enterprise's headquarters at least 45 working days before the auction is held.

2. Contents to be announced include:

a/ Name, address and business lines of the to be-auctioned enterprise;

b/ General information on its assets, labor, finance and land;

c/ Reserve price;

d/ Deposit level;

e/ Selling conditions;

f/ Time and place for buying dossiers and registering purchase;

g/ Time and place for submitting applications and paying deposits;

h/ Time and venue for organizing the auction session.

Article 9.- Registration for participation in an auction

1. Investors shall carry out the procedures for registering their purchase of enterprise with the auctioning organization. When making the registration, they must show proofs of their lawful status according to the provisions of Article 3 of this Regulation, including: Identity cards, mandates (for organizations) or passports (for foreigners) and sign commitments to observance of auctioning internal rules.

2. Investors shall buy auction dossiers at the auctioning organization. An auction dossier comprises detailed information on financial status and operation of the enterprise, registration application form, mandate form, internal rules of the auction session and documents, which must be signed by the buyer after the auction session, including sale and purchase contract and handover minutes.

Article 10.- Survey of actual state of an enterprise

Before holding the enterprise auction, the auctioning organization shall facilitate investors that have registered for auction participation to conduct a survey of the enterprise's actual state, to study dossiers, financial statements, asset inventory, certificates of the rights to own or use assets and land, and contracts related to the enterprise.

Article 11.- Submission of applications for purchase of an enterprise and payment of deposits

Investors shall submit applications for purchase of an enterprise to the auctioning organization at least 5 working days before the auction is held.

1. Applications for purchase of the enterprise must clearly state the investors' enterprise purchase bids. Bids must not be lower than the reserve price.

2. A deposit to be paid shall be equal to 10% of the reserve price but must not be lower than VND 50 million.

3. Upon receiving applications and deposits, the auctioning organization shall issue to investors certificates of submission of applications and receipts of deposit payment. The enterprise-auctioning organization shall have to keep secret enterprise purchase bids of investors.

4. Within the application-receiving time limit, the registered applicants may withdraw their applications and get their deposits refunded immediately.

Article 12.- Auction session

1. An auction session shall be held on the condition that at least two persons have submitted valid applications for enterprise purchase.

2. Investors that have submitted applications for enterprise purchase and paid deposits have the right to participate in the auction session.

3. Where only one submitted application for enterprise purchase is accepted, the agency having decided on enterprise sale shall apply the mode of sale on direct negotiations according to the provisions of the Government's Decree No. 80/2005/ND-CP of June 22, 2005, on assignment, sale, business contracting and lease of state companies.

4. Where there is no valid application for enterprise purchase, the enterprise-auctioning organization shall report to the enterprise auction steering board for reduction of the reserve price or application of other transformation modes.

Article 13.- Conducting of an auction session

1. The enterprise auctioning organization shall decide to appoint its competent representatives to conduct an auction session and invite a notary public to witness the auction session.

The calling of bids and the behaviors of participants at an auction session shall comply with its internal rules.

2. Auctions shall be held in form of secret ballot round by round and in continuous course. The auctioneer shall announce the highest bid among bids stated in bid cards of investors, which also serve as the reserve price in the next bidding round. Investors may base themselves on this price to request to continue the bidding. Until no one requests to continue the bidding, the person who offers the highest bid shall become the auction winner and be entitled to purchase the enterprise.

3. Where an auction winner refuses to sign the auction minutes or signs the auction minutes but refuses to sign the enterprise sale and purchase contract, the auctioning organization shall select and announce the person with the highest losing bid as the second auction winner, provided the bid offered by that person is not lower than the reserve price of the last bidding round. Where the second auction winner also refuses, the auctioning organization shall issue a document on cancellation of the auction-winning results and report such to the agency having decided on enterprise sale for reorganization of auction at another time.

4. Where all investors participating in the first bidding round of an auction offer bids lower than the reserve price, the auctioning organization shall announce the auction session unsuccessful, then report such to the agency having decided on enterprise sale for consideration and readjustment of the reserve price and reorganization of the auction at other time.

Article 14.- Auction minutes

1. At the end of an auction session, the auctioneer shall make and send an auction minutes to the auction steering board. The auction minutes must be signed by the auctioneer, the witness and the buyer.

2. In case of an unsuccessful auction session, the auctioneer shall have to make an unsuccessful auction minutes. Such a minutes must be signed by the auctioneer and the witness.

Article 15.- Post-auction procedures

1. Signing of enterprise sale and purchase contracts.

Within 2 working days after the end of a successful auction session, the buyer and the seller shall have to sign the enterprise sale and purchase contract.

2. Refund of deposits

a/ Within 10 working days after the end of an auction session, the auctioning organization shall refund deposits to investors that have complied with auction regulations, rules and order but are not entitled to buy the auctioned enterprise;

b/ Deposits shall not be refunded to investors in cases where buyers have offered bids lower than the reserve price, or offered in a bidding round bids lower than the highest bid of the preceding round, or violated internal rules of the auction session, or where the auction winner refuses to sign contract according to regulations.

II. PAYMENT, HANDOVER AND ANNOUNCEMENT OF TERMINATION OF OPERATION OF STATE COMPANIES

Article 16.- Payment

1. The buyer of an enterprise must fulfill the payment commitment in strict compliance with the sale and purchase contract. Its deposit shall be cleared against the amount to be paid for enterprise purchase. The positive difference, if any, shall be refunded to the buyer. Where the buyer breaches the payment commitment, he/she/it shall be fined according to the sale and purchase contract.

2. The payment time limit shall be stated in the sale and purchase contract, but must not exceed 6 months after the signing of the contract and two years after the date the enterprise sale is decided. The enterprise buyer may make payment in installments, provided that the first installment is equal to at least 70% of the contract value. A buyer that can pay the whole amount for enterprise purchase within 10 days after the signing of the contract shall be entitled to 10% discount of the contract value, which is exclusive of the land use right value and does not exceed the value of the state capital at the enterprise.

Article 17.- Handover of the enterprise

1. Within the time limit stated in the enterprise sale and purchase contract, if the buyer can pay 70% of the contract value and has sufficient assets to be mortgaged as security for the unpaid value or is provided with guarantees in strict compliance with the provisions of law, the agency having decided on the enterprise sale shall organize the handover of the enterprise to the buyer in accordance with the enterprise sale and purchase contract and the two parties shall jointly sign the handover minutes.

2. The already signed sale and purchase contract and handover minutes shall serve as legal deeds proving the buyer's ownership over the enterprise. This dossier set shall be sent to the finance agency of the same level for monitoring and supervision.

Article 18.- Announcement of termination of operation of state companies

Within 15 working days after the signing of the handover minutes, the agency having decided on the enterprise sale shall announce the sale and termination of operation of the enterprise on the mass media.

Article 19.- Proceeds from the sale of enterprises

1. Proceeds from the sale of enterprises in form of auctions in cases where buyers inherit payable debts and non-refundable deposits as fines for violations of auction regulations, after subtracting expenses for organization of auctions, shall be handled as follows:

a/ To be remitted to state companies, for sale of sections of companies;

b/ To be remitted to state corporations, for sale of their member companies;

c/ To be remitted into the enterprise reorganization assistance fund at the Finance Ministry, for sale of independent state companies.

2. Where a buyer of an enterprise does not inherit the latter's payable debts, the sale proceeds must be paid to creditors. The remainder, after subtracting expenses for the organization of the auction, shall be handled according to the provisions of Clause 1 of this Article. The agency having decided on the enterprise sale shall be responsible for payment of payable debts.

3. Where the remainder is not enough to fully pay the expenses for the sale of the enterprise, supports shall be provided by the enterprise reorganization assistance fund at the Finance Ministry.

Chapter III

RIGHTS AND OBLIGATIONS OF PARTIES INVOLVED IN THE AUCTIONING PROCESS

Article 20.- The agency having decided on the enterprise sale

1. To organize and direct all enterprise-auctioning activities, including:

a/ Setting up the auction steering board;

b/ Selecting and signing hire contracts with valuating organizations and auctioning organizations;

c/ Announcing the reserve price for enterprise auction;

d/ Organizing the handover of assets and bad debts which are not accounted into the enterprise value to the company trading in unsettled debts and assets of the enterprise right after the handover of the enterprise to the buyer;

e/ Signing or mandating the signing of the enterprise sale contract;

f/ Paying payable debts, receiving or recovering receivable debts in cases where the buyer does not inherit such debts;

g/ Organizing the handover of the enterprise;

h/ Announcing the termination of the enterprise's operation.

2. To request the director of the auctioned enterprise to compile dossiers for settlement of redundant laborers according to regulations after excluding laborers the enterprise buyer wishes to employ.

3. To approve the estimation and settlement of the enterprise sale expenses.

Article 21.- The auction steering board

1. To work out the tentative plan on enterprise auction, calculate and determine the reserve price to be reported to the agency having decided on the enterprise sale for approval.

2. To coordinate with the auctioning organization in publicly disclosing information on the enterprise, and organize the survey of the enterprise's actual conditions by investors.

3. To supervise the auctioning process conducted by the enterprise-selling organization.

4. To sign (if mandated) and organize the performance of the contract, prepare procedures for the agency having decided on the enterprise sale to hand over the enterprise.

5. To urge the payment, guaranteeing the payment made within the set time limit, to manage the mortgage dossiers and carry out procedures for public sale of mortgaged assets when the buyer breaches the payment commitment.

Article 22.- The auctioning organization

1. The auctioning organization shall have the responsibilities:

a/ To elaborate the enterprise purchase registration application form; procedures for accepting and considering applications; internal rules of the auction session, forms of mandate papers, registers of bidders and auction minutes; and draft the enterprise sale and purchase contract;

b/ To announce the auction on the mass media;

c/ To organize survey of the enterprise' actual state by buyers;

d/ To appoint or hire an auction session auctioneer, who shall exercise the rights and perform the obligations according to regulations of the auction steering board and internal rules of the auction session;

e/ To conduct the auction in order to identify the auction winner who offers the highest bid;

f/ To report to the enterprise auction-steering board on the results of the enterprise auction session.

2. The auctioning organization shall be paid the enterprise-auctioning service charges paid by the agency having decided on the enterprise sale.

Article 23.- The director of the auctioned enterprise

1. To perform the jobs specified in Clause 2, Article 7 of this Regulation.

2. To create favorable conditions for the survey of the enterprise at the request of the auctioning organization.

3. To report to the agency having decided on the enterprise sale all matters related to the increase or decrease of values of assets in kind or long-term investments in the transitional period for consideration and decision in writing.

4. To continue running production and/or business activities, preserve the enterprise's assets and make the official settlement report up to the time of enterprise handover.

Article 24.- Investors

1. To actively use purchased assets for continued production and/or business, reorganize the production, make new investments, change the managerial apparatus, and decide on type of the enterprise.

2. To inherit the enterprise's rights and obligations as agreed upon in the enterprise sale and purchase contract and the signed economic contracts.

3. To be obliged to pay the amount for the enterprise purchase within the time limit and under the terms of the contract, and fully observe the terms and commitments with the enterprise seller.

4. Not to get their deposits refunded as they are fined in the cases specified in Article 15 of this Regulation.

Article 25.- The Finance Ministry shall have to guide and supervise the implementation of this Regulation.